EY survey: 77% of foreign investors believe Malta is attractive, but needs to restore image
Malta remains attractive to businesses, EY’s Malta Attractiveness Survey has found this year, however a number of pertinent issues have been highlighted that need to be addressed, including skills issues and the need to restore Malta’s international image.
Executives from foreign-owned companies operating in Malta were surveyed for the 15th edition of EY’s Malta Attractiveness Survey.
The results, presented by Simon Barberi, director of EU Advisory within EY Malta, helped to uncover whether Malta is retaining its attractiveness for foreign investors or not. Indeed, the report finds that Malta does remain attractive, in line with previous years.
77% of current foreign investors believe that Malta is an attractive destination for Foreign Direct Investment. Those surveyed were asked to rate a list of criteria, in terms of whether in their company’s interests Malta was attractive or otherwise as a location where to expand, develop or retain investment activities.
The top criteria rated that make Malta attractive for their interests were corporate taxation (86%), stability of social climate (75%), the telecommunications infrastructure (72%) and potential productivity increase for companies (63%).
EY noted that Malta’s corporate tax regime remains the most attractive factor for foreign investment. It did however sound a note of caution and urged the exploration to discover what parameters must be strengthened to safeguard future investment.
The lowest ranked criteria was the stability and transparency of the political, legal and regulatory environment (46%). EY said that this low rank in the stability and transparency of the political, legal and regulatory environment was in line with recent years, but mentioned that in 2015, this parameter was second on the attractiveness scoreboard with 85%. EY also urged the need for steps to be taken to restore Malta’s image, locally and abroad.
Respondents also highlighted key areas Malta should focus on in order to remain globally competitive. Developing Malta’s education and skills base ranked top at 79%. In addition, investors also highlighted the need to provide support for innovation and to high-tech industries (63%), support for SMEs (59%) and to invest in major infrastructure, transport and urban projects (53%).
Interestingly, 49% of the respondents believe that Malta needs to encourage environmental policies and attitudes, a statistic that rose by 20% over the past two years, highlighting the ever increasing awareness of environmental importance.
28% of companies also want to see a reduction in labour costs, up by 9% in a single year. This point however, is an important statistic, given that many members of the public are in today’s world feeling the pinch, and there have been arguments made that wages in Malta are just not high enough.
In terms of regulatory updates, EY highlights that investors have viewed them favourably, “however with competitors moving in Malta’s first-mover advantage seems to be eroding”.
73% of investors believe Malta is keeping the pace with regulatory changes in competing jurisdictions, but EY also noted that this is 10% less than the previous year. 37% believe that Malta’s legislative framework offers an international advantage, which is a full 19% less when compared to last year.
Turning to skills, EY noted that investors’ ability to recruit specialised skilled workers remains a key issue.
73% have difficulty finding the personnel they require, and employers noted, generally, that salary expectations are rising.
EY also notes that 73% of the respondents are managing to retain their specialised personnel, but said that this is 8% below last year. EY notes that the skills shortage is hindering expansion plans for businesses.
In terms of technology, the survey found that 60% of respondents believe that, at all levels of their companies, they have the right skills in place to keep up with the technology.
67% of investors, the survey reads, are suggesting that policy-makers enhance workforce skills for the digital age, and 63% want policy makers to invest in digital technologies and infrastructure.
The technologies that are expected to have the biggest impact on businesses are automation and computing enhancements. EY noted however, that if government, businesses and educational institutions do not take immediate action to re-skill and upskill the workforce, there is the risk of large-scale labour displacement. They also highlight the need to change educational curricula to deliver the technical knowledge and soft and practical skills that tomorrow’s economy requires.
Turning to the impact of global developments on business, respondents were asked about the biggest risks impacting their next investment decisions locally. 63% cited talent shortages as the biggest challenge. Economic instability in the EU (excluding Brexit) ranked next with 28%.
In terms of their future in Malta, 80% of those surveyed said that they believe they will still be operating in Malta in 10 years’ time, which is the most positive response over the past five years.
The number of investors who believe Malta will remain attractive for FDI in three years’ time stood at 54%, which is 6% higher than last year. EY noted that respondents from the IT, telecommunications, insurance and other financial services sectors have higher confidence levels in Malta’s prospects.
The key sectors expected to drive Malta’s growth in the next five years came in with 58% saying iGaming, and 56% saying tourism and leisure.
During a panel discussion following the presentation of the survey, Chamber of Commerce president David Xuereb said more synchronicity is needed between where the country is going and the educational institutions.
“We are late, heavy and not motivated enough. In other countries, children as young as 10 are doing very different things to prepare them for technology.”
He also said the building industry needs more regulation and an upskill in quality. Real estate should not be considered as a driver of industry and growth but rather as a supporter, he said.
“We cannot rest on our laurels,” he warned. “When the economy is doing well, we always risk losing focus. We need to focus on what should be our next competitive steps. Success needs to be nurtured and oiled, to ensure that we are ahead of the game.”
Marisa Xuereb, managing director at Raesch Quartz, said the main bottleneck highlighted by the survey is the skills gap, which needs to be taken seriously. We have to invest to maintain the economic pace, she said.
MFSA CEO Joe Cuschieri was asked whether he hoped that Malta’s image abroad would improve next year. He said he hoped this would be the case, explaining that the financial services sector is building stronger relationships with its peers in Europe and the institutions. The MFSA is also strengthening the compliance culture in the industry and is addressing a number of major reforms in the field.
The discussion was moderated by The Malta Independent media consultant Rachel Attard.